- Despite the ongoing Bitcoin crackdown in China causing a major price crash, the head of Facebook Financial (F2) has noted that this is a great development for the digital asset.
- CNBC’s Jim Cramer has also been staggered by the Bitcoin price reaction given the current mining crackdown should encourage the scarcity narrative.
In the last 7 days, Bitcoin has wiped out nearly 20 percent of its value. At the start of the week, the digital asset was testing the $32,000 lows. The drop has largely been blamed on the ongoing cryptocurrency mining crackdown in China. The Chinese government has vowed to go after cryptocurrencies in the last few weeks citing environmental concerns, lack of value and their use to fund illegal activities. But is the crackdown on mining entirely a bad thing? Facebook’s David Marcus believes that this is a great development for Bitcoin.
According to some reports, China accounts for 90 percent of the mining hash rate. This is a dangerous level of concentration in a country that frankly is under the control of a regime. David Marcus who is currently the head of Facebook Financial and is a board member of the crypto project Diem, formerly Libra, noted on Twitter that Bitcoin mining power moving from China to the US and other regions was a good development that assured decentralization.
In the last few weeks, several states in the US have stepped up their efforts in attracting crypto-related businesses and specifically Bitcoin mining.
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Some community leaders have agreed with the sentiment noting that this is a temporary drop, largely an overreaction as the market is highly sensitive.
If Bitcoin mining is spread out across the world, it ensures that in the future a regulatory change in one region does not majorly affect Bitcoin as currently being witnessed.
Where next for Bitcoin?
The price reaction has not only puzzled the Facebook executive but CNBC’s Jim Cramer as well. Drawing an example from gold, he was curious why Bitcoin mining falling was leading to a price crash instead of it rising due to scarcity.
Cramer explained that the current crackdown should extend the scarcity narrative encouraging investors to accumulate more. According to the market observers, this would certainly be the case for gold. He, therefore, believes that the current market crash is not entirely based on the crackdown. Cramer says Bitcoin will not go up due to structural reasons.
For some market observers, the crackdown has been a confirmation that the Chinese government is threatened by cryptocurrencies which undermine its power. Ahead of the launch of the CBDC, China is looking to undermine popular cryptocurrencies to ensure the success of their digital currency.
After briefly dipping under $32,000, Bitcoin has regained some momentum and is back above $33,000. Having weathered the initial shock, investors are looking to push prices back above $35,000 and establish support above this. The $40,000 resistance is set to continue evading the digital asset now more than ever. Despite this, market pundit PlanB is still optimistic that it will be overcome and Bitcoin will end the year at a conservative $135,000 price tag.
